Warrior Met Coal (HCC) Q3 2025 Earnings Transcript

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Date

Wednesday, November 5, 2025 at 4:30 p.m. ET

Call participants

Chief Executive Officer — Walter J. Scheller

Chief Financial Officer — Dale W. Boyles

Vice President, Investor Relations — Brian Chopin

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Takeaways

Blue Creek longwall launch -- Blue Creek mine's longwall operations began in October, approximately eight months ahead of schedule, supporting early production ramp and long-term growth.

Production guidance increase -- Full-year 2025 company production guidance was raised by 10% due to expected Blue Creek output of 1,800,000 short tons, up 80% from the initial guidance of 1,000,000 short tons.

Federal coal reserve acquisition -- Warrior Met Coal (NYSE:HCC) was the successful bidder on a 58,000,000 short ton federal coal reserve lease contiguous to existing operations for $47,000,000, payable over five years, subject to the finalization of a binding lease agreement with the Bureau of Land Management.

Record sales volume -- Quarterly sales hit a record 2,400,000 short tons, a 27% rise from 1,900,000 in the same quarter last year, with 378,000 tons from Blue Creek sold, primarily to Asia.

Adjusted EBITDA -- Adjusted EBITDA stood at $71,000,000, up 32% sequentially from Q2 2025, but down from $78,000,000 in Q3 2024.

Net income -- Net income was $37,000,000, or $0.70 per diluted share, compared to $42,000,000, or $0.80 per diluted share, in Q3 2024.

Total revenues -- Revenues reached $329,000,000, a $1,000,000 increase from the year-ago period, as 27% higher volume added $85,000,000, offset by $81,000,000 lower average gross prices and a $11,000,000 higher High Vol A mix.

Gross price realization -- Realization was 83% of benchmark, up from 80% in Q2 2025 but below the targeted 85%-90% range; causes included product mix, geography, tariffs, and higher High Vol A sold into Asia on a CFR basis.

Cash cost of sales -- Cash cost of sales totaled $237,000,000 (74% of mining revenues), $7,000,000 higher year-over-year, primarily due to volume, with lower variable transportation and royalty costs offsetting part of the increase.

Cash cost per ton -- Cash cost of sales per short ton FOB port was $101, down from $123 last year, attributed to spending controls, reduced variable costs, and low-cost Blue Creek tons.

Free cash flow -- Free cash flow was negative $20,000,000 due to $105,000,000 in operating cash flows and $125,000,000 spent on capital expenditures and mine development.

Liquidity position -- Available liquidity at quarter's end was $525,000,000, including $336,000,000 in cash, $48,000,000 in investments, and $141,000,000 under the ABL facility after a $27,000,000 capacity expansion.

Geographic sales mix -- In the quarter, 43% of coal was sold into Europe, 38% into Asia, and 18% into South America, with spot sales accounting for 11% of volume.

Blue Creek capital expenditures -- Blue Creek project capital expenditures were $64,000,000 in the quarter and $171,000,000 year-to-date, bringing total project-to-date capital expenditures to $888,000,000, which remains on budget in a range of $995,000,000 to $1,075,000,000.

Adjusted EBITDA margin -- Adjusted EBITDA margin registered at 22% versus 24% a year ago, and per ton margin was $30, down from $42 last year, reflecting the lower average selling price and product mix.

SG&A expenses -- SG&A expenses of $17,000,000 were $6,000,000 higher year-over-year, primarily due to increased employee-related costs.

Operating cash flow drivers -- Operating cash flow was $67,000,000, with a $37,000,000 sequential increase in free cash flow, mainly from higher sales volume and pricing.

Full-year cash cost guidance lowered -- Management reduced full-year cash cost of sales per ton guidance, reflecting improved recent actual results and high operating efficiency.

Summary

Warrior Met Coal (NYSE:HCC) executed an early startup of Blue Creek's longwall operations and expanded its reserve base with the federal coal lease acquisition, positioning the company for increased production and a lower-cost structure. The company delivered sequentially higher adjusted EBITDA, driven by volume gains and a narrower index price spread, despite a year-over-year decline in average net selling prices. Free cash flow turned negative as capital investments ramped, while record sales volumes were supported by robust contractual demand and Blue Creek contributions.

CEO Scheller said, "we've raised our full-year 2025 production volume guidance by approximately 10%," citing Blue Creek's acceleration as the primary driver.

Incremental Blue Creek production was mainly directed toward Asia, with current sales considered trials pending broader contractual confirmation, according to CFO Boyles.

The federal coal reserve acquisition enables operational efficiency improvements and could potentially support future infrastructure expansions, though management stated a second longwall remains several years away.

SG&A and depreciation both increased in step with higher sales volumes and employee expenses, as noted in the financial review.

Management indicated continued hiring needs for Blue Creek operational ramp-up but intends to avoid excessive inventory build-up by pacing output to contracted volumes and market demand.

Industry glossary

Longwall: A high-efficiency underground mining method utilizing a large shearing machine (longwall shearer) that removes coal in one continuous slice.

High Vol A: A specific grade of metallurgical coal with high volatile matter, used in steelmaking and valued differently than premium low volatile (PLV) grades.

PLB FOB Australia: The primary coking coal price index for hard coking coal loaded Free On Board (FOB) at Australian ports, serving as a global seaborne coal benchmark.

CFR: Cost and Freight, an international shipping term where the seller pays for transportation of goods to a port of destination, but not insurance.

ABL facility: Asset-Based Lending facility, a line of credit secured by company assets such as inventory and accounts receivable.

Blue Creek: Warrior Met Coal's growth project mine in Alabama, designed for high-volume, low-cost steelmaking coal production.

Full Conference Call Transcript

Brian Chopin: Good afternoon, and welcome, everyone, to Warrior Met Coal, Inc.'s third quarter 2025 earnings conference call. Before we begin, let me remind you that certain statements made during this call, including statements relating to our expected future business and financial performance, are forward-looking statements according to the Private Securities Litigation Reform Act. Forward-looking statements by their nature address matters that are to different degrees uncertain. These uncertainties, which are described in more detail in the company's annual and reports filed with the SEC, may cause our actual future results to be materially different from those expected in our forward-looking statements.

We do not undertake to update our forward-looking statements whether as a result of new information, future events, or otherwise, except as may be required by law. For more information regarding forward-looking statements, please refer to the company's press releases and SEC filings. We will also be discussing certain non-GAAP financial measures which are defined and reconciled to comparable GAAP financial measures in our third quarter press release furnished to the SEC on Form 8-K, which is also posted on our website. Additionally, we will be filing our Form 10-Q for the third quarter ended 09/30/2025, with the SEC this afternoon.

You can find additional information regarding the company on our website at www.warriormetcoal.com, which also includes a third quarter supplemental slide deck that was posted this afternoon. Today on the call with me are Mr. Walter J. Scheller, Chief Executive Officer, and Mr. Dale W. Boyles, Chief Financial Officer. After our formal remarks, we will be happy to answer any questions. Thanks for taking the time to join us today to discuss our third quarter 2025 results. I'll start by providing an overview of the quarter before Dale reviews our results in additional detail.

Extremely excited to share that our third quarter presented an opportunity for Warrior Met Coal, Inc. to showcase its strength in a number of ways. From our strong financial performance, we have been driving success in the near term while continuing to improve our long-term position and prospects. We have an exciting future ahead of us, and this is a direct result of our unwavering commitment to operational excellence and the exceptional teamwork and dedication of our employees. First, from an operational achievement perspective, I'm thrilled to announce that in October, we started the longwall operations at Blue Creek, which were approximately eight months ahead of schedule.

This remarkable accomplishment underscores our team's exceptional execution and reflects our commitment to driving shareholder value with high-value strategic investments. Second, factoring in the earlier startup of Blue Creek longwall, we now expect to produce approximately 1,800,000 short tons of High Vol A steelmaking coal from the Blue Creek mine, representing an additional 800,000 short tons this year, or an 80% increase over our initial 2025 guidance. As a result, we've raised our full-year 2025 production volume guidance by approximately 10%. Third, earlier this month, Warrior Met Coal, Inc. won the bidding in the federal coal lease sale of 58,000,000 short tons of high-quality steelmaking coal reserves contiguous to our current operations.

Subject to the finalization of a binding lease agreement with the Bureau of Land Management, this strategic opportunity is expected to enhance our long-term value proposition by bolstering our reserve base and extending the life of our core mining operations. I'll provide further details on these accomplishments in a few moments.

From a financial performance perspective, we delivered a strong performance in the third quarter despite ongoing weak steelmaking coal market conditions. The combination of our high-quality products and strong customer relationships supported by our variable cost model generated impressive net income and adjusted EBITDA. We have confidence that our operational successes will continue to drive strong financial performance over the coming quarters. Turning back to Blue Creek, let me provide you some additional details on this transformational growth project. Achieving a startup for Blue Creek's longwall operations eight months earlier than our original timeline is almost unheard of in this industry. Our projects are usually delayed for years and many millions of dollars over budget, particularly in an inflationary environment.

The success of our Blue Creek development was cumulative over the project timeline and a testament to our incredibly talented employees and partners. It provided an opportunity for us to demonstrate the strength of our talented workforce and the performance-driven culture of our organization. I want to extend my sincere thanks to all Warrior Met Coal, Inc. employees and our partners for their hard work, dedication, and resilience to bring this project to fruition approximately eight months ahead of schedule while staying on budget. These accomplishments are a direct result of their efforts and continue to drive our success as we execute our long-term growth strategy.

The Blue Creek mine features world-class assets which incorporate the most modern and latest technology available in the mining industry. It was built with the scope and scale to accommodate more than 6,000,000 short tons of annual production of high-quality steelmaking coal and the potential to be the lowest cost mine in the world. We have made significant progress on the barge loadout and other key infrastructure components. Financially, we've dedicated another $64,000,000 in capital expenditures in the third quarter, totaling $171,000,000 year-to-date on the Blue Creek project. That brings the total project-to-date capital expenditures to $888,000,000, which remains on budget, ranging from $995,000,000 to $1,075,000,000.

Looking ahead, we will be laser-focused in the fourth quarter on ramping up longwall production and optimizing the performance of the underground surface infrastructure. While the underground longwall operations have recently commenced, a significant amount of work remains to complete the project, which we expect will occur by the end of the first quarter in 2026. The remaining work includes completing the barge loadout, paving roads, completing storage and shop buildings, additional storage silos, and final electrical installations, along with the usual assortment of final project details.

The accelerated Blue Creek longwall startup enables us to increase our guidance for total company production and sales volumes for 2025, as you will have seen in our earnings release. We've raised our Blue Creek production volume 80% from 1,000,000 short tons to 1,800,000 tons. We expect to sell approximately two-thirds of the Blue Creek coal production, or approximately 1,200,000 tons, in 2025. This increase in production from Blue Creek raises our full-year outlook for production volume by approximately 10% at the midpoint of the range. This startup marks another critical inflection point in the development of this world-class asset, representing the start of the transition from capital investment to free cash flow generation.

Turning to another growth opportunity, we learned in September that we were the successful bidder in a federal coal lease sale administered by the Bureau of Land Management. Once we enter into this lease, the acquisition will expand our footprint strategically with the addition of an estimated 58,000,000 short tons of high-quality steelmaking coal reserves. These reserves are adjacent to existing infrastructure, which will allow for efficient integration into our current operations and capital planning. Also, this acquisition will allow for access to additional reserves that can further the life of both Mine 4 and Blue Creek. The total bid for the leases was approximately $47,000,000, which will be paid over five years.

We appreciate the Bureau of Land Management's efficient review, the support of the Alabama federal delegation, and our local and state government officials in advancing this process. We also appreciate the Department of Interior Secretary Doug Burgham and the entire Trump administration for their support of mining on federal lands. We are actively engaged with the relevant agencies to ensure timely progress and compliance with all requirements. We expect this process will be completed shortly after the end of the government shutdown.

Now let's turn to the steel and steelmaking coal markets during the third quarter, which provide the backdrop for our strong operational and financial results. Our markets faced headwinds from increased Chinese steel exports, subdued global demand, and oversupplied seaborne steelmaking coal markets. Nevertheless, our team's focus and resilience enabled us to achieve record quarterly sales volume. The drivers underlying the weakness are the same as they have been for some time. First, exports of low-priced Chinese steel are up over 10% for the first nine months of the year compared to 2024, which was already a record year for Chinese steel exports.

Second, with the exception of India, lackluster global steel demand continued because of trade uncertainty and tepid global economic activity. Third, the seaborne steelmaking coal markets remained under pressure due to strong supply, as demonstrated by strong Chinese domestic steelmaking coal production and a slowdown in Chinese imports. While there have been discussions in China of anti-involution and coal production controls combined with mine safety checks and shutdowns, those actions have fallen short in reality. While trade tensions continue to weigh heavily on global market sentiment, the European Union recently announced plans to protect the EU steel sector from the unfair impacts of global steel overcapacity by limiting import volumes and doubling the level of tariffs to 50%.

These actions could lead to a recovery of steelmaking coal demand from Europe in the long term, but we do not anticipate a recovery anytime soon. Likewise, the steelmaking coal market remains oversupplied, as demonstrated by the prolonged period of weak pricing. According to the World Steel Association monthly report, global pig iron production decreased by 1.5% for the first nine months of 2025 as compared to the prior year period. Pig iron production in China, which is the world's largest production region, decreased by 1.1% for the same period. The rest of the world's pig iron production experienced a decline of 2.5% for the first nine months of 2025.

India remains a bright spot with a growth rate of 7% and is expected to continue growing with new blast furnace capacity expected to come online in the next year.

Our strong sales volume was primarily driven by high contractual demand from our customers combined with the strong performance of our existing mines and the additional commercial sales from our Blue Creek mine. This combination enabled Warrior Met Coal, Inc. to achieve a record high quarterly sales volume in the third quarter of 2,400,000 short tons compared to 1,900,000 in last year's same quarter, representing a 27% increase. We sold 378,000 tons of Blue Creek development steelmaking coal during the third quarter, which were contractual volumes sold primarily into Asia. Our sales by geography for the third quarter break down as follows: 43% into Europe, 38% into Asia, and 18% into South America. The spot volume was 11% for 2025, which was primarily sold into Europe. For the full year, our spot volume is expected to be approximately 10% to 15% of total sales volume. Production volume in 2025 was 2,200,000 short tons, compared to 1,900,000 in the same quarter of last year, representing a 17% increase. Our existing mines continue to perform well, and the continuous miner units at our Blue Creek mine produced 175,000 short tons during the third quarter, adding to the overall increase in production volume.

Blue Creek production was lower than the second quarter as more time was spent on construction and development work for the longevity of the mine and the startup of the longwall. Our coal inventory levels decreased slightly to 1,100,000 tons at the end of September, compared to June this year. I'll now ask Dale to address our third quarter results in greater detail.

Dale W. Boyles: Thanks, Walter. Warrior Met Coal, Inc. was built to excel in all market conditions with high-quality steelmaking coal assets, a low-cost position globally, possessing a strong balance sheet with ample liquidity, and a relentless focus on operational excellence. Each of these attributes was clearly demonstrated in our third quarter results and recent accomplishments. From my vantage point, I believe few companies are able to embark on and make continued strategic investments of over $1,000,000,000 in an organic growth project like Blue Creek without diluting shareholders with equity offerings or additional leverage. For Warrior Met Coal, Inc., our ability to accomplish this is due to our incredibly talented workforce, which enables us to continuously focus on resource development and operational excellence.

Turning to market conditions we experienced this past quarter, our primary index, the PLB FOB Australia, was relatively stable, averaging $166 per short ton. This average pricing has remained relatively consistent through the first and second quarters of this year. However, during the third quarter, the PLB CFR China Index price recovered from its low points earlier in the year and averaged $162 per short ton. This average was over $11 per ton higher than the second quarter of this year. Although the arbitrage narrowed by the end of the third quarter, it remained closed most of the third quarter.

As for the main second-tier indices, the Australian LVHCC index price recovered from its low point in the second quarter and averaged $137 per short ton, while the U.S. East Coast HVA index price established a low for the year, averaging $141 per short ton. As a result, we saw the relativity of the LVH index price compared to the PLV index price improve from 78% in the second quarter to an average of 82% for the third quarter. This narrowing of the spread primarily drove our higher average net selling price in the third quarter compared to the second quarter this year. On the contrary, the U.S.

East Coast High Vol A price index recorded a decrease in relativity from 92% to 85% during the same period. We achieved a gross price realization of 83% for the third quarter compared to 93% in last year's same quarter, which was a function of relative index pricing, product mix, geography, tariffs, and freight rates. The 83% achievement was 3% better than the second quarter this year. This result was lower than our annual targeted range of 85% to 90% primarily due to three things. First, the LVHCC index price relative to the PLV index price has widened compared to the historical relationship between these indices.

Second, we sold a higher mix of High Vol A product versus premium Low Vol product. Third, the higher High Vol A volume has been sold primarily in the Pacific Basin on a CFR basis, which is net of freight cost.

As Walter noted earlier, the steelmaking coal markets continue to be impacted in the third quarter by the same factors. Let me first highlight our third quarter financial achievements compared to 2025. Our third quarter adjusted EBITDA of $71,000,000 was 32% higher than the second quarter this year, primarily due to two reasons. First, our sales volumes were 6% higher, including an increase of 139,000 tons of Blue Creek coal with its inherently lower cost structure. Second, our average net selling prices were $6 per ton higher, primarily as a result of the higher High Vol A pricing relative to PLV pricing of 82% versus 78% in the second quarter.

The higher sales volume, higher average net selling prices, and incremental Blue Creek sales volumes contributed to the higher operating cash flows of $67,000,000, $37,000,000 of higher free cash flow than the second quarter of this year. Our spending for capital expenditures in mine development was a combined $30,000,000 higher in the third quarter compared to the second quarter of this year, primarily related to the investment in Blue Creek. Excluding the Blue Creek capital expenditures and mine development investments in the third quarter, free cash flows were a positive $86,000,000.

Now let us compare the third quarter of the current year to the prior year third quarter results. Warrior Met Coal, Inc. recorded net income of $37,000,000 or $0.70 per diluted share compared to net income of $42,000,000 or $0.80 per diluted share in the same quarter of 2024. We reported adjusted EBITDA of $71,000,000 in the third quarter of this year compared to $78,000,000 in the same quarter of last year. Our adjusted EBITDA margin was 22% in the third quarter compared to 24% in the same quarter of last year. On a per ton basis, our adjusted EBITDA margin was $30 per short ton for the third quarter this year compared to $42 in last year's third quarter.

The decrease in the quarterly results was primarily driven by 21% lower average net selling prices and the 13% higher sales mix of High Vol A product versus Premium Low Vol product. These decreases were partially offset by 27% higher sales volume, including lower cost Blue Creek volumes, lower variable cost for transportation and royalties, plus controlling and managing our production cost.

Total revenues were $329,000,000 in the third quarter of this year compared to $328,000,000 in the same quarter of last year. The total increase of $1,000,000 was primarily due to the 27% higher sales volume impact of $85,000,000 offset by the impact of a decrease in average gross selling prices of $81,000,000 and a higher mix of High Vol A volume sold of $11,000,000. In addition, demurrage and other charges were $6,000,000 lower compared to last year's third quarter. This resulted in an average net selling price of $136 per short ton in the third quarter compared to $172 per short ton in the third quarter of last year.

Cash cost of sales was $237,000,000 or 74% of mining revenues in the third quarter of this year, compared to $230,000,000 or 72% of mining revenues in the third quarter of last year. Of the $7,000,000 net increase in cash cost of sales, there was a $61,000,000 increase in cost which was attributed to the 27% increase in sales volumes, which include the leverage of low-cost Blue Creek tons. These higher costs were offset partially by $54,000,000 of lower costs driven by the lower variable transportation royalty cost. In addition, we rationalized and tightly managed our spending on supplies, repairs, and maintenance expenses throughout the operations.

Cash cost of sales per short ton FOB port was approximately $101 in the third quarter of this year compared to $123 in the same quarter last year. The decrease was primarily related to overall spending at the legacy mines of $11 per ton due to tightly managing our overall spending, lower variable transportation royalty cost of $8 per ton on lower steelmaking coal prices, and $4 per ton from the incremental sales of low-cost Blue Creek tons.

While we were able to manage our spending tightly during the third quarter, some cash costs such as repairs and maintenance may be higher in future quarters due to potential unexpected breakdowns that would require investment to restore the equipment to their normal operating status. Our cash cost of production for the third quarter of this year was 67% of our total cash cost per short ton, compared to 66% in the same quarter last year. Overall, transportation royalty costs were 33% of our cash cost of sales per short ton in the third quarter this year, on lower average net selling prices compared to 34% in the same quarter last year.

As a result of the lower average net selling price, our cash margin per short ton was $35 in the third quarter this year compared to $48 in the same quarter last year.

SG&A expenses were $17,000,000 and were about $6,000,000 higher than the third quarter of last year, primarily due to higher employee-related expenses. Depreciation and depletion expenses were $44,000,000, which was higher than the third quarter last year and the higher sales volume. Our net interest income earned from cash investments was lower due to lower average cash balances and lower rates of return combined with higher interest expense on newly leased equipment. We recorded an income tax benefit of approximately $14,000,000 and pre-tax income of $23,000,000 in the third quarter.

Our year-to-date effective income tax rate varied from the statutory federal income tax rate of 21% primarily due to tax benefits recognized for depletion expense, marginal gas well credits, and a foreign-derived intangible income deduction, which exceeded forecasted pre-tax book income.

Turning to cash flow, free cash flow was a negative $20,000,000 due to $105,000,000 in operating cash flows less cash used for capital expenditures and mine development of $125,000,000. Capital spending totaled $83,000,000, which included $64,000,000 spent on the Blue Creek project as previously noted. Mine development costs for the Blue Creek project in the third quarter were $42,000,000 and continued to be below budget as we continued to focus on cost control. Working capital decreased by $31,000,000 during the third quarter primarily due to lower accounts receivable and higher accrued expenses. Our investment into Blue Creek is generating revenue contributing positive operating and free cash flow to the overall company.

We amended and extended our ABL, which increased the commitments available to be borrowed by $27,000,000 to $143,000,000 and extended the maturity date, giving us further financial flexibility and higher liquidity. Our total available liquidity at the end of the third quarter this year was $525,000,000 and consisted of cash and cash equivalents of $336,000,000, short and long-term investments of $48,000,000, and $141,000,000 available under the ABL facility.

Let me turn to our revised outlook and guidance for the full year 2025. As Walter previously noted and outlined in our earnings release, we have updated and increased our production sales volume guidance for the full year 2025 as a direct result of the early startup of the longwall operations at Blue Creek. In addition, we lowered our guidance for cash cost of sales per ton reflecting more recent actual results. While weak steelmaking coal market conditions are expected to persist for the remainder of the year, we remain optimistic about our long-term growth trajectory. I'll now turn it back to Walter for his final comments.

Walter J. Scheller: Thanks, Dale. Looking ahead, we recognize persistent challenges and our customers' markets will continue to be driven by ongoing surplus in Chinese steel exports, heightened global trade tensions, and subdued economic activity worldwide. However, we're hopeful that new trade agreements with key global partners will be supportive for our markets and will materialize in the near term. Similarly, we expect the steelmaking coal markets to be pressured by additional supply expected to come online over the next few quarters due to a combination of new capacity and the return of certain idled mines. We believe the pricing will remain weak and range-bound, and supply rationalization will be necessary to balance market dynamics.

While the steelmaking coal markets are expected to continue to be weak in the upcoming quarters, we're excited about the positive accomplishments in our business and with some of our key partners. For example, on October 13, the Alabama State Golf had its official ribbon-cutting ceremony to celebrate the completion of a multi-year project of deepening the draft and widening the channel at the port. This project is expected to benefit both Warrior Met Coal, Inc. and our customers by allowing them to load heavier and larger vessels in the future. In addition, several important machinery and equipment upgrades are being completed at the port over the next few quarters and position the company for long-term success.

We appreciate our long-standing partnership with the state. In conclusion, the combination of accelerated Blue Creek production and strategic reserve acquisition significantly enhances our long-term growth strategy and provides Warrior Met Coal, Inc. a strong platform to meet long-term sustained global demand for premium steelmaking coal. Our world-class assets, low-cost position, and disciplined capital deployment are a foundational strength. We remain focused on delivering long-term shareholder value through strategic resource development and operational excellence. With that, we'd like to open the call for questions. Operator?

Michael: At this time, I would like to remind everyone that to ask a question. And your first question comes from Katja Jancic with BMO Capital Markets. Please go ahead.

Katja Jancic: Hi, thank you for taking my questions. And first, congratulations on the early Blue Creek startup and the quarter. Maybe starting on the Blue Creek with the early startup, how should we think about production next year?

Walter J. Scheller: Well, we're still working through our budget right now. But as you know, our plan was not to have started that till midyear. So naturally, that number is going to be enhanced greatly. But we're still working on that. I'm hesitant to give you an exact number on where we'll be. I think it's going to be a lot of it's going to be market-driven as we get into next year as opposed to operationally driven. We're working on that right now.

Katja Jancic: And then maybe secondly, the CapEx is coming down on the Blue Creek project. Can you remind us how you're thinking about capital allocation?

Walter J. Scheller: Yes, Katja. Thank you for the question. Well, I think it would be similar to what we've done in the past when we generate the excess free cash flow above the needs of the business, then we will return cash via different methods, which will be the fixed quarterly dividend, which I expect would be higher in the future, supplement that with some cash special dividends and possibly some stock buybacks along the way selected.

Katja Jancic: Perfect. Thank you.

Michael: Thank you. And your next question comes from Nick Giles with B. Riley Securities. Please go ahead.

Nick Giles: Yes. Thank you so much, operator. Guys, I really want to commend you on this incredible achievement. I know Tuscaloosa breeds champions, but it's clearly not just football. So my question was what does this mean from a hiring perspective? Do you still need incremental workers to ramp up here? And if sales are expected to be market-driven, would you plan to build inventory or would you really toggle production just on market conditions?

Walter J. Scheller: Well, I think the part of your question how many people, we still need more people. We're okay running at the pace we are right now, but we'll continue to hire over the next year easily and probably continue continuing beyond that. And I think next year, we'll be looking at a balance. We'll look at, as I've said before, we really wanted to make sure that we had a certain percentage of the tons tied up before we ramped up. I'm not going to say 4.5 is the number for next year, but I think you're probably going to be closer to that type of a number for Blue Creek.

But we'll be looking at cash flow, we'll be looking at what's happening in the market. We don't want to build a bunch of inventory and we don't want to flood the market either. So we're going to be balancing all those factors to make sure we maximize the value for the company.

Nick Giles: Well, I appreciate that. And then maybe just looking to the fourth quarter here, I mean, I think if I did the math right, your guidance could imply a 20% increase in sales. Can you just walk us through what maybe on a mine-by-mine basis how sales could shift quarter over quarter?

Walter J. Scheller: Well, I don't have that breakout by mine, but what we said is two-thirds of that volume of Blue Creek for the year should be sold this year, 1,200,000 tons. And we've sold about half of that so far through the end of the third quarter. So you're going to see a big jump just because of the Blue Creek tons there, Nick. So that's the biggest driver in the fourth quarter.

Nick Giles: Got it. Thanks for that, Dale. Maybe one last one if I could. It's good to see you were able to tuck in such a significant amount of reserves at a reasonable cost. I think you mentioned this is relevant to Mine 4 and Blue Creek. But my question is how much does this acquisition influence any potential decision to add another longwall to your operating footprint? How much capital could be required later down the road? Appreciate any color there.

Walter J. Scheller: Well, I've said in the past an additional longwall, you're probably looking at incremental capital probably, I don't know, $300,000,000 or so because you're going to have to add three continuous miner units, you're going to have to add another longwall, you're going to have to add modules to the preparation plant. So there's a lot of infrastructure and just a lot of build-out that would have to happen. In terms of making that decision, we had enough reserves without the BLM to add a second longwall if we thought the market justified it.

This just makes us even more efficient because some of the places where we were going to have to skip around some coal now we have control of it. So this is going to make us a lower cost, more efficient operation at both Mine 4 and Blue Creek as we roll forward.

Nick Giles: Understood. Well, guys, congratulations again and continued best of luck.

Walter J. Scheller: Thank you.

Michael: Thanks. And your next question comes from George Eadie with UBS. Please go ahead.

George Eadie: Yes. Good day, Walter and Brian, hope you're well. Really impressive performance here and good set of numbers. So well done. Can I just follow-up on that question before? So, Walter, another longwall. Is it a price decision? Like if you were guaranteed, say, 200 metric benchmark PLD, would you do it? Like the spreadsheet math clearly works. When we get to sort of mid-2026 as the first longwall at Blue Creek is ramped up? How would we go about thinking about the decision for another one?

Walter J. Scheller: I think the real what we need to do is we need to stretch this first longwall as tight as we can and see just what it's capable of. What we've said is 6,000,000. I don't know where the top end is for that one longwall and how many continuous miners it takes you to support that one longwall if you're running it flat out throughout the year. So the real question is going to be where is that limit? And then beyond that, what's that next longwall get you? So I think we're years away from making that decision because I think there's still so much headroom on the first longwall.

George Eadie: Yes. Okay. Thanks for that, Walter. And then maybe to Dale, you just sort of call out all of those three factors, discounts, more High Vol A, more Asia sales. How do I triangulate that with the Low Vol hard coking index flat quarter on quarter? Your realized price was up quarter on quarter. Like, that caught me off guard. Like, how do I triangulate that going forward as well, like more Blue Creek sales, more Asia sales? Is it likely that this was just a one-off really strong realized pricing quarter? Or how do I sort triangulate those factors?

Dale W. Boyles: Well, I don't think it's a one-off quarter. I think it's you go back to my remarks, what I said is, look, the increase from first quarter second quarter to the third quarter was two things. 6% higher sales volume and a net realized price of $6 a ton higher. Well, $6 a ton came primarily from the increase in the LVHCC during the third quarter. So that relativity rose from 78% in the second quarter to 82%. So that spread narrowed. Right? So that drove that $6 a ton, which just flowed to the bottom line. Think of it that way. Take your PLV price and then pick your relativity.

George Eadie: Okay? So just for example, $200 PLV, 80% relativity and you're going to be pretty close.

Dale W. Boyles: So that relativity, that 82%, that 4% quarter on quarter jump is what I was talking about there. Sorry, Dale. Like, that caught me off guard, like, more High Vol A sales, more into Asia, like, how do we think about that going forward in Q4, I guess, as well?

Dale W. Boyles: Well, we don't break it out by geography on a forward-looking basis. But we do think that in the long term, more volume will go into Asia long term as we ramp up Blue Creek. So that will be a gradual climb over the next year or two.

George Eadie: Yeah. Okay. No. That's right. And just last one on price there's

Walter J. Scheller: Yes. I was just going to say one more thing, George, to think about there is customers have their different time schedules throughout the year. So that's why we might sell more into Europe in one quarter versus another quarter. So it's hard for us to forecast that into the future as to what geography is going to go into. So we don't have that preciseness very far out. We know about a quarter ahead, but not too much further out than that.

George Eadie: Yes. Okay. No, it's and then just what was sort of sound quite bearish sort of met coal prices at the start, but benchmark prices are up at $197 and flat starting to now talk quite optimistic the demand outlook ex-China. Any sort of color you can give?

Walter J. Scheller: Well, I think I always try to be conservative in my expectations. And that's the way we run our company. And we make sure that we're able to respond to any positive market news, but we make sure we're prepared in the case of any negative market news. It's hard for me to see a reason why prices will go up. Or at best, they'll maintain the level they're at now, I think. But it takes one event to cause this price to shift dramatically. But I don't know what that one event is right now.

Dale W. Boyles: Yes. It's hard to see on the demand side what the catalyst is. So then you're thinking about the supply side. And as we said in our remarks earlier, look, there's the Blue Creek coming online next year. There's other mines that are restarting next year. So you're going to have additional supply coming on that's going to keep that pretty balanced, we think, going forward. So it's hard to be too optimistic right now about what the next year or two looks like. Other than we should perform well because of Blue Creek coming online. And it's such a much lower cost structure, we're going to benefit from that.

Michael: Next question comes from Nathan Martin with The Benchmark Company. Please go ahead.

Nathan Martin: Thanks, operator. Good afternoon, gentlemen. Congratulations on the early longwall startup. Want to come back to the pricing question quickly. I think maybe what we're trying to figure out is how should we think about realizations versus the benchmark kind of going forward as you bring on these additional Blue Creek tons? Do you think you can get back to kind of your targeted 85% to 90% range of the benchmark?

Walter J. Scheller: Well, that's what our target is. So yes, I think we can get there. Just depends on what the markets do. I mean, we can't control that. So my crystal ball says maybe. Prices change all the time for different reasons. And it's just I mean, you can't predict it, I can't predict it. Right? Prices will be tomorrow. So just the realizations are what they are. They were 83%. Our targeted range is 85% to 90%. We're creeping up. It depends on what continues to happen with LBHCC pricing. In the Pacific Basin, that will be a big determinant of what we get to.

Dale W. Boyles: I think said another way, we definitely think if we will get back to that 85% to 90%. The question is just when.

Walter J. Scheller: And we can't tell you if that's going to be two quarters from now or a year and a half from now. We know when that will occur.

Nathan Martin: Makes sense. That's fair. Then as far as Blue Creek sales are concerned, Dale, I think you said that you guys were maybe initially targeting those tons towards Asia. Is that correct? And then how many Blue Creek tons have you guys been able to contract at this point with starting up the longwall early?

Dale W. Boyles: Well, the majority of the sales volume, say for yes, has gone into Asia. And right now, these tons are being shipped are really trials to get confirmation of contracts. So I don't want it's a little early with the volume that we sold to give a percentage of how much we've contracted because of these trials. So I don't want to get into that yet. If we have better and hopefully we will have better during our fourth quarter earnings call about that. But right now it's a little bit too early because we only have about 1,200,000 for this year.

Nathan Martin: I appreciate that. And then maybe just one on the cost side of the equation. Good to see cash cost guidance for this year down again another $5. Just want to make sure, is there any change in your met price assumption there? That would have impacted that update? And then quarter, Dale, I think you mentioned you'd built in some maintenance and repair costs. I think you touched on that briefly in your prepared remarks as well. Is that still the case in that range?

Dale W. Boyles: Yes. That's kind of baked into that range. And really the price assumption hasn't changed because the PLVs average virtually the same amount each and every quarter this year.

Nathan Martin: All right. Very helpful. I'll leave it there. Appreciate the time and best of luck in the fourth quarter.

Walter J. Scheller: Thank you. Great. Thank you very much.

Michael: And your next question is a follow-up from Nick Giles with B. Riley Securities. Please go ahead.

Nick Giles: Thanks much for taking my follow-up. I just wanted to follow-up on that last question on the cost side. I think guidance does still imply a slight tick up in the fourth quarter. So I wanted to see if there's anything specific that could drive that or if that's maybe just an added level of conservatism? Thank you.

Dale W. Boyles: Yes. It's just baking in what if. Right? As I said in my prepared remarks, we've been pretty tight on repairs and maintenance all year. Something could break and we've got to fix it in the fourth quarter. And that's covering those kind of things. And if we have a little tick up and we have recently in the last couple of weeks on the prices to 196. So there could be some change there a little bit on the call. That's all baked into that range. And we're averaging at the for the year to date, we're averaging at the bottom of the range. So slight tick up would be very, very minor.

Nick Giles: Got it. I appreciate the clarification.

Walter J. Scheller: All right. Thanks, Nick.

Michael: At this time, there are no further questions. We will now turn the call over back to Mr. Scheller for any closing comments.

Walter J. Scheller: That concludes our call this afternoon. Thank you again for joining us today. We appreciate your interest in Warrior Met Coal, Inc.

Michael: Thank you. And that concludes today's conference. Thank you all for participating. You may now disconnect.

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